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Just Two Charts
Both short-term and long-term, the large liquid US stock market indices have become massively decoupled from the bond and credit markets. Since the former is supposed to discount a combination of the latter (macro growth/de-growth from bonds and micro business-risk/cash-flow-sustainability from credit), one has to wonder which reality will come to pass...
Short-term...
Long-term...
Do either of these charts look 'normal'? Sustainable?
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Simply put - for American companies, despite the fall in Treasury yields, the cost of borrowing (i.e. interest rates) has already started to increase rather dramatically and that's not just energy names.
Charts: Bloomberg
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Don't worry though, it's different this time...
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i see 3 charts. Propaganda.
I see two, Old World or New World.
I SEE DEAD PEOPLE!
oh shit... is that a mirror?
Each chart illustrating bubble blowing, and the last bubble popping.
The current bubble (Housing 2.0/Tech 2.0/Student & Auto Loans) is mighty turgid.
" The junk bond crisis is contained "
Grandma, 2015
tyler....i agree that equity prices are likely overvalued by 15-30% (S&P 1300-1500) but not sure of your defintion of "long-term" on the chart (2011-2012 ?)
Since "taper" was uttered by the FED.
Since then it has been like last call at the bar.
S&P 666 is true valuation ;-)
Conspiracy Fact: UN reports confirm Israel aiding ‘rebels’, Al-Qaeda groups fighting in Syria
The price of poker just went up
Decoupling frequently precedes derailment
Place your bets accordingly Lads
I just called Citi bk and they answered :
So what? that s the next 6000 years new normal world.
I just called Citi bk and they answered :
So what? that s the next 6000 years new normal world.
2 persistent perspectives in the charts in this article and other 'wtf divergence' charts being posted about: the inflationary perspective (S&P) and the deflationary perspective (credit, real assets). I read a good article this week by Bill Bonner, who I think describes the situation correctly.
http://bonnerandpartners.com/best-way-play-us-stocks-mr-market
The storm that raged in 2008 was fundamentally deflationary. It was so predictable that we didn’t need tomorrow’s headlines; the weather forecast was obvious. After decades of taking on debt, Americans started to stagger under the weight of their debt-service costs. When house prices fell, their knees buckled and their backs broke. Households cut spending and reduced borrowing. But they are still heavily in debt. In 1971 – before the big credit bubble began inflating under the new fiat currency regime – American households had $5 of income for every $4 of debt. Now, for every $5 of household income they have $12 of debt. That’s down from the “peak debt” of 2007 – at $13 for every $5 of disposable income – but still much more than the historic average.
The feds’ response to Americans’ prudence was also predictable. After so many years of backstopping the stock market… and luring consumers and businesses deeper into debt… the feds weren’t about to quit.Besides, their theories told them this was when their help was needed most.This put Mr. Government and Mr. Market on opposing sides of the big blow. The feds whip the winds up from the South. Mr. Market sends them blowing down from the North.
The feds want inflation; Mr. Market wants deflation. The feds want more credit; Mr. Market wants debt paid down. The feds send down torrents of liquidity; Mr. Market mops them up...Zero-interest-rate policies… quantitative easing… deficit spending – all are meant to offset Mr. Market’s dark clouds and fierce tornadoes.If Mr. Market weren’t in such a destructive mood, these measures would have already sent interest rates and inflation soaring skyward… with the Dow flying to 25,000… gold soaring to $3,000 an ounce… and $5 for a Big Mac.And if the feds weren’t so determined to stop him, Mr. Market probably would have knocked the Dow down to about half of where it is today. He would also have crushed half of the major Wall Street firms. And you’d probably be able to get a Big Mac for $1 – with fries.
Who will win this contest? In the end, Mr. Market will triumph. He always does. He represents the forces of nature… and the gods. He is the fellow who keeps trees from growing to the sky… who forces prices back to the mean… and who never gives a sucker an even break.
And that bell you don’t hear ringing at the top of a market? That’s Mr. Market not ringing it.
My uneducated non-economist view is that either stocks will join credit and real assets... or we're into hyperinflation at the 'street' level. (Japan may reach this first.) Not sure that even a stock market 'crash' will restore confidence in the currency, since everyone now knows that even a 'crash' is brought to us via central planning when and if they feel like it.
And when those same planners unveil the NWO SDR new 'reserve' currency? Good luck getting people confident in trusting that, either.
"Money don't come with a set of instructions boy"---- Grandpa
"The bigger they are the harder they fall."
That last chart is a classic, thanks for the reminder.
Will Smith - Just The Two Of Us
http://www.youtube.com/watch?v=_WamkRSDeD8 (4:30)
Nothing looks normal, nothing looks sustainable but an overlay chart is not enough: years of specifically finding what appear to be lures of deviations in correlation need to be put through the numerical ringer to determine a decision tree of outcomes or we can do nothing but toss dice & chips or walk away.
I believe ugliness lies ahead. I love the way it is always being kicked out a year or two and never going to happen tomorrow. It is as if we can't handle what is coming at us and need more time.
If shit hits the fan things could move so fast you might not be able to get out. For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Below is an article looking at how it could happen sooner rather than later.
http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html